An energy-independent Santa Barbara County is within reach (published in March of 2009 in the SB News Press)

With the recent major decline in oil prices, the debate concerning offshore drilling has faded from the public consciousness.  What has not faded is the increased economic hardships we are facing, both in Santa Barbara County and in the state of California as a whole.  The recent budget crisis at the state level highlights the ongoing financial problems that we will face as our legislature seems unable or unwilling to reduce spending to levels commensurate with sustainable revenues.  Santa Barbara County is facing similar financial strains, which has led to cutbacks and job losses, including painful cuts in education, along with budget deficits that will likely increase as the recession lingers.

With this in mind, I thought it would be worthwhile to revisit the offshore oil and gas issue, and to look at it from an economic viewpoint.  Accessing the vast offshore oil deposits we have in the waters directly off the coast could, in the long-run, offer a clear and direct path to the near complete conversion to energy independence for the entire county while cutting taxes and funding important educational and social programs. 

Mark Schniepp, Director of the California Economic Forecast, estimates that there are 1.5 billion barrels of discovered oil and gas that could be produced from the Santa Barbara Channel and state tidelands.   The total revenues from the production from these fields over the next forty years, based on Schniepp’s estimates, would be approximately $138 billion.  At the standard royalty rate of 16.67 percent, and using a standard 80/20 split between the state and Santa Barbara County, the total royalties would be approximately $23 billion over the forty-year period expected production period.  The county’s portion would be about $4.6 billion over the forty years, or about $115 million per year on average, and about $230 million per year during the peak production years of 2020 – 2037 (if we got started relatively soon). 

In addition to the royalty revenues, Schniepp also estimates that the county would receive property tax revenues of approximately $370 million per year.  According to the current structure for county revenue sharing, 45 percent goes to schools, 14 percent to flood control, 13 percent to bond measure repayment, and 23 percent to the general fund.  This would mean that $85 million per year from new property taxes would go into the county’s general fund, which could then be used, in part, for renewable energy programs and incentives for hybrid or full-electric vehicles.  Another $166 million per year would be available for education.  With this funding, we could add teachers, instead of laying them off as we are doing right now, and we could reduce the student / teacher ratios significantly, while also providing computers and other valuable educational facilities and equipment.

If we add-up the potential revenues from the oil and gas production royalties and the property taxes, we would be receiving about $200 million per year, on average, for the next forty years or so, that could go into the general fund; $85 million from property taxes and $115 million from royalties.  The bulk of the oil and gas production would come in the early years of the production cycle, providing substantially more than $200 million per year during the peak production years.  In fact, total revenues flowing into the general fund would be about $315 million per year, from 2020 through 2027. 

According to Allen, there is already a federal subsidy of 30 percent available for solar investments, which would reduce the $1.4 billion cost to below $1 billion with additional state credits.  The county, using the general funds from the new property taxes and royalties, could offer an additional 50 percent subsidy for the purchase of solar panels and large-scale solar farm generated electricity, (or whatever incentive they choose), incentivizing county residents to buy or lease solar panels and other renewables, and promoting sustainable energy throughout the county. 

Applied to the remaining cost of the solar electricity, this additional county subsidy could reduce the total cost for residents to about $500 million, or about $3,850 per household, which is less than the average cost of three years of residential electricity.  Through rooftop leasing agreements, anyone wishing to have solar panels installed would have no out-of-pocket costs, with the county subsidy.  At this very reasonable cost, most of Santa Barbara County would be economically incentivized to rapidly convert to renewable electricity.

If the total subsidy were about $500 million, it would take less than three years to cover the entire subsidy amount, with an average of about $200 million per year flowing into the general fund.  Additional subsidies, such as a large rebate for county residents who buy a hybrid or full-electric vehicle, and a complete conversion of all county vehicles to hybrids or full-electrics, would further promote a cleaner, sustainable, energy-independent and competitive Santa Barbara County.  Additional funds could be used for solar recharging stations throughout the county, at parking structures and businesses, offering free electric recharges for plug-in hybrids and full-electric vehicles, further incentivizing county residents to buy these vehicles.  All together, we could come very close to the goal of sustainability and energy independence within as little as five years, once production of the new fields commenced.

These days virtually the only oil that floats onto our beaches comes from the natural oil seeps, which have been reduced as a direct result of the drop in pressure in the rock formations from offshore drilling.  Long-time residents will recall that in the 1950’s, before there was any offshore drilling, our beaches were routinely soaked with oil and tar, coming from these natural seeps.  Today, despite the 1969 spill, our beaches are significantly cleaner because of reduced seepage, as a direct result of offshore oil and gas production.   From an economic standpoint, our cleaner beaches promote tourism, which is one of the most important industries we have, accounting for many jobs, and substantial revenues for the county.   

We have a rare opportunity, because of our offshore oil and gas assets, to set an example for the entire world of how a community can use its resources to convert to a sustainable, energy-independent model.  With this in mind, I believe we need to consider offshore drilling as a means to an end; that end being an energy independent Santa Barbara county.  In the 1970’s, we also had an oil price spike, but efforts to develop sustainable energy died when prices fell.  Let’s be a bit smarter this time, and make a strategic decision that will allow us to permanently end our dependence on foreign oil in the county, and set an example the whole world can follow.   

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